IRC – IFRS 5

Sec on A

[Kaplan Q31]
1. BN has an asset that was classi ed as held for sale at 31 March 20X2. The asset had a
carrying amount $900 and fair value of $800. The cost of disposal was es mated to be $50.

According the IFRS 5 Non-current Assets Held For Sale and Discon nued Opera ons, which
value should be used for the assets as at 31 March 20X2?

a. $750
b. $800
c. $850
d. $900

[Kaplan Q32]
2. According to IFRS 5 Non-current Assets Held For Sale and Discon nued Opera ons which of
the following represents criteria for an asset to be classi ed as held for sale.

(I) Available for immediate sale in its present condi on

(II) Sales is highly probable
(III) The sale is expected to be completed within the next month
(IV) The asset is being marketed at a reasonable price

a. All the above

b. I, II and III
c. I, II and IV
d. II, III and IV

[PRK 2024 Q189]

3. As at 30 September 20X3 Dune Co's property in its statement of nancial posi on was:

Property at cost (useful life 15 years) $45 million

Accumulated deprecia on $6million

On 1 April 20X4, Dune Co decided to sell the property. The property is being marketed by a
property agent at a price of $42 million, which was considered reasonably achievable price
at that date. The expected costs to sell have been agreed at $1 million. Recent market
transac ons suggest that actual selling prices achieved for this type of property in the
current market condi ons are 10% less than the price at which they are marketed.

At 30 September 20X4 the property has not been sold.

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 At what amount should the property be reported in Dune Co's statement of nancial
posi on as at 30 September 20X4?

a. $41 million
b. $37.8 million
c. $36.8 million
d. $42 million

[TEST 3 SUNWAYTES]
4. A discon nued opera on was disposed of in the current year. How should this be presented
in the statement of pro t or loss ?

a. A single-line entry showing post-tax pro t or loss of the opera on and the post-tax gain
or loss ond disposal
b. A separate column showing the results of the discon nued opera on, with the gain or
loss on disposal included under ‘other income.’
c. A single line entry showing the pre-tax pro t or loss of the opera on and the pre-tax gain
or loss on disposal included under ‘other income’. Tax e ects included in ‘income tax
expense.’
d. A single-line entry showing the pre-tax pro t or loss of the opera on and the pre-tax
gain or loss on disposal, with tax e ects included under ‘income tax expense’.

[Kaplan Q33]
5. At 1 April 20X4, Tilly owned a property with a carrying amount of $800,000 which had a
remaining es mated life of 16 years, and was carried under the cost model. On 1 October
20X4, Tilly decided to sell the property and correctly classi ed it as being ‘held-for-sale’. A
property agent reported that the property’s fair value less cost to sell at 1 October 20X4 was
expected to be $790,000, which had not changed at 31 March 20X5.

What should be the carrying amount of the property in Tilly’s statement of nancial posi on
as at 31 March 20X5 ?

a. $775,000
b. $790,500
c. $765,000
d. $750,000
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 Sec on B
[ Specimen Exam Sept 2016 Q21-25]
At a board mee ng in June 20X3, Neutron Co’s directors made the decision to close down one of its
factories by 30 September 20X3 and market both the building and the plant for sale. The decision
had been made public, was communicated to all a ected par es and was fully implemented by 30
September 20X3.
The directors of Neutron Co have provided the following informa on rela ng to the closure:
Of the factory’s 250 employees, 50 will be retrained and deployed to other subsidiaries within the
Neutron group during the year ended 30 September 20X4 at a cost of $125,000. The remainder
accepted redundancy at an average cost of $5,000 each.
The factory’s plant had a carrying amount of $2·2 million, but is only expected to sell for $500,000,
incurring $50,000 of selling costs. The factory itself is expected to sell for a pro t of $1·2 million.
The company also rented a number of machines in the factory under opera ng leases which have
an average of three years to run a er 30 September 20X3. The present value of these future lease
payments at 30 September 20X3 was $1 million, however, the lessor has stated that they will accept
$850,000 if paid on 30 October 20X3 as a full se lement.
Penalty payments, due to the non-comple on of supply contracts, are es mated to be $200,000,
50% of which is expected to be recovered from Neutron Co’s insurers.

21 . Which of the following must exist for an opera on to be classi ed as a discon nued opera on
in accordance with IFRS 5 Non-current Assets Held for Sale and Discon nued Opera ons?
(1) The opera on represents a separate major line of business or geographical area
(2) The opera on is a subsidiary
(3) The opera on has been sold or is held for sale
(4) The opera on is considered not to be capable of making a future pro t following a period of
losses
a. 2 and 4
b. 3 and 4
c. 1 and 3
d. 1 and 2

22. IFRS 5 Non-current Assets Held for Sale and Discon nued Opera ons prescribes the recogni on
criteria for non-current assets held for sale. For an asset or a disposal group to be classi ed as held
for sale, the sale must be highly probable.
Which of the following must apply for the sale to be considered highly probable?
i. A buyer must have been located
ii. The asset must be marketed at a reasonable price
iii. Management must be commi ed to a plan to sell the asset
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 iv. The sale must be expected to take place within the next six months
A (2) and (3)
B (3) and (4)
C (1) and (4)
D (1) and (2)

23. What is the employee cost associated with the closure and sale of Neutron Co’s factory which
should be charged to pro t or loss for the year ended 30 September 20X3?
A $125,000
B $1,250,000
C $1,125,000
D $1,000,000

24 What is the pro t or loss on discon nued opera ons rela ng to property, plant and
equipment for the year ended 30 September 20X3?
A $1·75 million loss
B $1·75 million pro t
C $550,000 loss
D $550,000 pro t

25 According to IFRS 5 Non-current Assets Held For Sale and Discon nued Opera ons which of the
following amounts in respects of a discon nued opera on must be shown on the face of the
statement of pro t and loss?

Shown on the face of SOPL Not shown

Revenue
Gross pro t
Pro t a er tax
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 Sec on C
[WORKBOOK ACTIVITY 3 CHAP18]
MILLIGAN CO STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE
YEAR ENDED 31 DECEMBER 20X1
20X1
$'000
Revenue 3,000
Cost of sales (1,000)
Gross pro t 2,000
Distribu on costs (400)
Administra ve expenses (900)
Pro t before tax 700
Income tax expense (210)
PROFIT FOR THE YEAR 490
Other comprehensive income for the year, net of tax 40
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 530

During the year, Milligan Co ran down a material business opera on with all ac vi es ceasing on 26
December 20X1. The results of the opera on for 20X1 were as follows:
20X1
$’000
Revenue 320
Cost of sales (150)
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 Gross pro t 170
Distribu on costs (120)
Administra ve expenses (100)
Loss before tax (50)
Income tax expense 15
LOSS FOR THE YEAR (35)
Other comprehensive income for the year, net of tax 5
TOTAL COMPREHENSIVE INCOME FOR THE YEAR (30)

Milligan Co recognised a loss of $30,000 on ini al classi ca on of the assets of the discon nued
opera on as held for sale, followed by a subsequent gain of $120,000 on their disposal in 20X1.
These have been ne ed against administra ve expenses. The income tax rate applicable to pro ts
on con nuing opera ons and tax savings on the discon nued opera on's losses is 30%.

Required
Prepare the statement of pro t or loss and other comprehensive income for the year ended 31
December 20X1 for Milligan Co complying with the provisions of IFRS 5.
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